Dell Inc. is one of the successful companies in the computers and technology field. The success of this company comes from understanding and meeting customer needs. However, Dell is faced with the inherent differences in customer segments - segmentation represents a balance between the marketing ideal and the production ideal, this can defined as:
Segments must have certain characteristics; however, Dell costumer segments characteristics can be faced as follows as following:
We can note that there are two levels of segmentation. First, customer segments are based on company's revenues. Business customers are subdivided into government, large companies, hospital, small business accounts, and education.
While in purchasing computers, the second segmentation is based on users functional requirements which differ from one user to another according to the types of tasks they perfor. Laurence & Carolyn, 2004, p.4). Therefore, Dell improves the ability to provide a solution for individual problems due to This detailed understanding of customer segments.
With the passage of time, Dell cut its customer segments into more detailed segments as shown in Figure 2. It's will be easier to know the customer or consumer and identify unique opportunities by segmentation. Moreover, Finer segments are more manageable and give the company better scrutiny and focus.
Dell's understands each segment’s "size" whereas business customers form 85% of Dell's customers and this segment size was enough for Dell to be capable to supply it economically. Based on the types of tasks which customers perform – (CAD) computer aided design programs for engineers versus word processing for secretaries – It was easy to "identify" the constituents of this segme...
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Laurence Buchanan and Carolyn Simmons, 2004, Competitive advantage through channel management, Garvin School of Business.
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This concept created the big change that causes the competitive advantage. Dell eliminated reseller 's markup and the expenses and the risks associated with conveying huge amount of inventories. This could not have happened without many other action that Dell has taken into consideration. So, other companies had to had to create all the components themselves. Indeed, all the various pieces of the industry had to be vertically integrated within one firm. These companies needed to manufacture enormous structures to create everything a PC required. They had no real option except to end up being expert in a wide array of components, some of which had nothing to do with creating value for the client. On the other hand, Dell has a different approach that they establish a partnership with different companies to help them produce their products. So, they have fewer things to manage, fewer things to go wrong, which enabled them to manage their inventories. As a result, this model the direct model has allowed Dell to leverage their relationships with both suppliers and customers, which helped them to build a much larger firm in no
... thing while being in the right time on the right place. Everything else is the history. Many stories were told about Dell. Dell was most famous for its customized products which they sold directly to customers. This strategy worked for some period, however to capture bigger market share Dell had to return to the retailers. Michael Dell is one of the biggest asset Dell has. His enthusiasm and hard work build a multibillion dollar company. He has promising outlook for the IT market and always make strategic decisions. Therefore Dell at the beginning made strategic decision to sell in the stores to capture market share, then they decided to sell directly to customers to avoid retailer margins, however, at the end they returned to retailers to capture market share again. Although these strategies contrasted each other, they were right strategies for the right time.
A segment profile comes down to describing customer characteristics of a typical customer. It is important to build profitable relationships with the right customer is good for the marketer’s stakeholders. After this, the brand can start to build up their company target market, as well as selecting merchandise that would be best for the store.
Kotler, P., Keller, K.L. (2012). Marketing Management (14th ed.). Upper Saddle River, NJ: Pearson Prentice Hall.
Segmentation is the process of determining the breakdown of the target market into smaller specific variables that make it easier to evaluate. Gabbott M (2004, p 159) describes the consumer related segmentation variables as being Geodemographic, Psychographic and Behavioural.
Many factors should be addressed when defining a target market. These factors include market segmentation, product life cycle, and the four "P's" that make the marketing mix. Market segmentation is the process of dividing a total market into market groups consisting of people who have relatively similar product wants and needs. There are four major segmentation variables: geographic, demographic, psychographic, and behavioral. Geographic segmentation includes world region, country region, city, density, or climate. Demographic segmentation can consist of age, gender, income, occupation, education, race, religion, or nationality. Social class, lifestyle, and personality fall into the psychographic segment. The behavioral segment divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product (Bethel, 2007). Once the market segment is identified, that market can be targeted.
Dell Inc. weakness was cell manufacturing because their assembled computers were being shipped five to six days after the order was placed. It is an inconvenience for the customers to always send their computer away to have it repaired. First, they are left without internet access. Second, the time it reaches Austin, Texas, have it repaired, and shipped back can take days. The company opportunities were the Dell U.K. that open business in 1987 and in that country it was a lot of companies selling cheap computers. Dell Inc. strides on loyalty among customers and employees, and that could only be derived from having the highest level of service and performing products. Segmentation within the company enables them to measure the efficiency of the business in terms of assets use. Dell Inc. evaluates their return on invested capital in each segment, compare it with other segments, and target what the performance of each should be.
It is known that manufacturing process and cost reductions, which are pillar of the Dell business model, high profit margin will break the mightier growth for the company, through which, the best practices come in all forms. Hence, to conclude, when it comes time to decide the selection of the strategies, Dell should accept both strategies to a greater extent. It will be popular course of action for Dell to refute the claims of experts about the future of Dell. However, in this uncertain age of market, where globalization can play a key and integral role for business progress, Dell has to contemplate all the factors now to enhance its brand via products and marketing together with wide-ranging business models. Nonetheless, the management has to put its shoulder to the wheel to make the things
Dell Inc. has realized that the most efficient path to the customer is through a direct relationship, with no intermediaries to add confusion and cost. With the power of their direct model and their team of talented people, they are able to provide to their customers high-quality, relevant technology, customized systems, superior service and support and products and services that are easy to buy and use.
Stavros P. K, Markos H. Tsogas & Charles B, (2011) "Positioning strategies in business markets", Emerald 15, (2000)
Segmentation is a marketing strategy that involves separating a wide target market into small groups of customers who share the common need of using or purchasing the product that needs to be marketed. Market segmentation strategies are utilized to identify these groups of consumers and strategies are designed and implemented to make the product or service appeal to them. Support and also the product will be strategically placed in order to successfully achieve the ultimate marketing goal. Businesses and organizations may come up with different type of strategies involving different products and catchy phrases depending on the product or the target segment.
Caroline and Jennifer said that ‘Market segmentation is a crucial marketing strategy. Its aim is to identify and delineate market segments or set of buyers which would then become targets for the company’s marketing plans.’ (Tynan and Drayton, 1987) There are many ways to segment the market, such as age, region, environment, psychology and wages (Hall, Jones and Raffo, 2010).
Kotler, P. & Keller, K.L., (2009), A Framework for Marketing Management. 4th edition, Pearson Prentice Hall: USA
Dell’s initial competitive strategy, when it was founded in 1984 by Michael Dell, was to focus mainly on differentiation. Its strategy was to sell customised personal computer systems directly to customers, which was a rapidly emerging market at that time (1). This was done by targeting second-time customers, those that already understand computers and know what they wanted. Meanwhile other companies at the time was selling “’plain brown wrapper’ computers” (2). By offering customisations, Dell gained a better understanding of customers’ needs and wants. This helped the organisation position itself differently against the more popular brands, such as Compaq and IBM.
Case Study of Dell Computer Corporation Introduction Michael Dell founded Dell Computer Corporation in 1984 with a simple vision and business concept – that personal computers can be built to order and sold directly to consumers. Michael believed his approach had two advantages: (i) by passing distributors and retail dealers eliminated the markups of resellers, and (ii) building to order greatly reduced the costs and risks associated with carrying large stocks of parts, components and finished goods. Its build-to-order and sell-direct approach proved appealing to growing numbers of customers in the mid 1990s as global PC sales rose to record levels. In 1998, it was already the 3rd manufacturer in the United States with a 12% share of PC market and a nearly 6% share worldwide. The company’s fastest growing market for the past several quarters was Europe.